Can I use my business bank card for personal expenses?

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It’s a simple question that can sometimes have a complicated answer: Can I use my business bank card for personal expenses?

As a business owner you may have complete ownership of your business’s finances, however here we breakdown why using your bank card for personal expenses may not be the best idea.

Keeping the books straight

When it comes to submitting accounts or sending the company books to an accountant, it is important that a third party can clearly interpret your company purchases. For example, which Amazon orders on your statement were for your business and which were not.

Remember that company accounts need to be a wholly accurate representation of the business’s performance over a year. Dipping into the business account and then not reconciling this with your own personal statement can lead to accuracy issues, causing problems later down the line.

Businesses need to oversee their cash-flow carefully. If cash-flow becomes tight, and a business owner has been using their business credit card and personal card interchangeably, it becomes more difficult to determine where the problem area lies, and how to improve the company’s bottom line.

Time is money

When looking after your own accounts, it may be beneficial to use cloud-based accounting systems and online banking services. Cloud-based accounting systems can automatically log business spending when it happens, making their recording accurate and far less time-consuming. However, if a business owner is using a personal card for business expenses, or vice versa, the time saved by using accounting systems will be outweighed by making sense of their statements at the end of the month.

Alternatively, if a business owner is using traditional banking, an accountant or bookkeeper to help with their accounts and they are mixed with personal and business, this means time will be wasted working out how to separate the different types of spending. This can affect the companies bottom-line if you are paying professionals an hourly rate.

Analysing accounts

An accountant aims to help businesses pay the correct amount of tax on your company earnings. However, when accounts are mixed with personal spending in business accounts, issues begin to arise. Most accountants are cautious, ensuring that they are advising businesses in line with the law. If accountants are required to analyse spending closely, they could potentially argue that a lot of the expenditure looks personal and cannot be considered a business expense.

What if I’ve set up a limited company?

If you have set up a limited company or partnership, using a business account to cover personal spending is still not advisable. Setting up an LLP (limited liability partnership) offers business owners protection against a wide range of issues that could arise.

Legal protections offered to business owners can be diluted if business accounts are used for personal spending, so it is vital in these instances to keep things separate. Mixing personal and business accounts in an LLP can also make tax affairs exponentially more challenging to unwind, and end up costing far more.

How to ensure finances stay separate

Ultimately, if you are a business owner, then you are in charge of the spending of company finances. If you’re self-employed, you won’t receive a salary in the same way as someone working for a corporation.

Whether you’re self-employed or a business owner, here are some ways to ensure you still manage to keep business finances separate.

Pay yourself a salary

Depending on the type of business that you are running will determine how you receive a salary – an accountant will be able to advise on how to manage pay in different work scenarios. In any situation, it is essential to set aside a salary.

Paying yourself once a month, or every fortnight and denoting this in your accounts helps to keep the books balanced while ensuring that you can take care of yourself financially. Whether you do this as a balance transfer or a cash withdrawal, make sure that it is fully accounted for on your books.

Be sure that your company retains sufficient cash reserves to manage financially challenging times so that you can enjoy more clarity and freedom with your own finances.

Technological innovation is driving genuine transformation in the banking industry, so as a business owner its important to keep up with the latest trends to best manage your business banking.